Morningstar: 4 Percent Rule May Be Safe Again

Morningstar: 4 Percent Rule May Be Safe Again

A new report from Morningstar suggests that the “4 percent” rule may be a safe option for retirees once again as investment portfolios recover from last year’s losses.

The 4 percent rule suggests that retirees can make their retirement account last 30 years if they withdraw no more than 4 percent of the funds annually, then adjust subsequent withdrawals for inflation.

Why it matters: The market volatility of recent years made that rule riskier. Morningstar’s recommended safe withdrawal rate was 3.3 percent in 2021 and 3.8 percent in 2022.

What they’re saying: “As yields on bonds and cash have increased, the forward-looking prospect for portfolio returns—and in turn the amounts that new retirees can safely withdraw from those portfolios over a 30-year horizon—have continued to edge up since we covered the topic last year,” says Amy C. Arnott, CFA.